At a time of great change in the industry and in the global economic situation, MasterCard remains focused on new markets, products and insights that can drive your business forward. In the areas of debit and contactless payments, for example, MasterCard’s advanced technology and rewards platforms continue to spur new product offerings. MasterCard Payment Gateway™ is another step forward, offering banks a new tool to help corporate customers streamline costs. We also continue to provide our customers with insights into consumer segments and markets that provide opportunities for growth despite the uncertain economy. Mastering products and markets are both key to a healthy portfolio, especially during times of such change. This edition of MasterCard Highlights offers a glimpse of current trends and ideas for the road ahead.

Consumers are re-evaluating and re-prioritizing their finances in light of today’s complex and fast-changing economy. A recent MasterCard Perspectives report, “U.S. Consumer Dynamics During Uncertain Times,” provides issuers with the latest research and fresh insights on how to navigate today’s uncertain consumer marketplace.

The report identifies six consumer segments based on demographics, attitudes and behaviors, and discusses how these groups differ in their approach to spending and electronic payments. According to the study, four of the six segments—“Comfortably Affluent,” “Life-Stage Immersed,” “Diligent Budgeter” and “Finances in Transition”—offer the greatest opportunity for issuers. They continue to represent over 70 percent of spend on credit and almost 50 percent of spend on debit.

Despite the economic downturn, MasterCard continues to expect heavy credit spend segments, particularly among the “Comfortably Affluent” segment, to remain loyal to credit. Among the “Finances in Transition,” “Paycheck to Paycheck” and “Getting By” segments, there is a more cautious approach to spending and payments usage. However these three consumer groups continue to be receptive to value-based financial services, such as no-fee annual credit cards and low rates.

A: These are certainly challenging times for emerging markets, with the credit crunch slowing global capital flows. However, long term, we continue to see emerging markets as increasingly important to our business model and as opportunities to enhance our worldwide footprint. Currently, MasterCard conducts business in 210 countries and territories and derives more than 50 percent of our revenue from outside of the United States.

We have seen cities in emerging markets develop their own viable businesses and industry clusters, enhancing their role in the larger economy. With more people traveling and crossing borders than ever before, and with globalization on the rise, electronic payments are advancing all over the world. Today, we not only have a significant presence in mature markets like the United States, but we continue to experience strong growth in regions beyond the conventional BRIC countries, such as Asia, Europe, Latin America and the Middle East countries.

A: We believe that relative wealth will continue to grow in emerging markets around the world. More consumers are seeking to engage in and understand the function of the global marketplace. Emerging markets offer financial institutions an opportunity to provide valuable services to both new and existing customers and also service more customers in new market segments.

The key is understanding which markets are robust enough to weather what’s happening in the global economy. In late October, MasterCard released our first Emerging Markets Index—a study that ranks and evaluates 65 emerging market cities according to their strengths and connectivity. When it comes to understanding which markets can withstand this crisis the best, the report is an excellent place to start.

As consumer behaviors continue to shift toward customization, simplicity and convenience, we are seeing more momentum around electronic payments. This is reflected in the double-digit growth of debit in markets around the world. To help meet this growing demand, MasterCard is taking a strategic approach to debit innovation.

Our recent debit bank partnership in the United Kingdom will provide an extended portfolio of global debit solutions, growing the already successful Maestro offering to include Debit MasterCard. This will offer cardholders in the U.K. greater choice, flexibility and acceptance across the world.

In the U.S., debit cardholders seeking more sophisticated rewards platforms can participate in the MasterCard Savings™ program, part of the next generation of debit card rewards. The program represents an opportunity for both debit and prepaid cardholders to enjoy special savings and other offers from merchants across the U.S.

With more than 37 million MasterCard® PayPass™ cards currently in use globally, and acceptance at more than 122,000 merchants across 25 countries (with the addition of Russia in September), PayPass is increasingly becoming the payment method of choice for the on-the-go consumer.

Below are global highlights for PayPass in 2008:

• Russia: The first PayPass transaction in the Russian Federation took place in September. PayPass-enabled terminals will be installed at several hundred locations in Moscow, including supermarkets, drug stores, gas stations and quick-serve restaurants.

• Poland: Maestro® PayPass pre-paid cards were the currency of choice for the Coke Live Festival and the Heineken Open’er Festival. Also, coffeeheaven, Gymnasion and Multikino joined the growing number of merchants accepting PayPass.

• Turkey: MasterCard partnered with a local bank to provide cardholders with a single card for both contact and contactless payments, which can be used to pay tolls on motorways and bridges, among other things.

• Italy: Telecom Italia and MasterCard are working to develop mobile payment services for SIM cards and MasterCard PayPass contactless payments with Near Field Communication (NFC) technology.

• Canada: MasterCard Canada is testing Near Field Communications (NFC)-enabled phones with MasterCard PayPass capability on Bell Mobility’s wireless network. In addition, Sobeys and Staples in Canada are now accepting PayPass at their store locations.

• United States: MasterCard announced in September that one of the nation’s leading drugstore chains, Rite Aid, is now accepting MasterCard PayPass contactless payments.

According to MasterCard research, the global affluent market increased 9.4 percent between 2006 and 2007 while in Latin America it grew 20.4 percent. This growth has led to a rise in personal wealth in countries and cities within that region.

In line with these trends, MasterCard has partnered with banks across Latin America to launch customized products to meet the needs of this affluent class. In Mexico, MasterCard launched the World Elite™ MasterCard® card. We’ve continued our commitment to MasterCard Black™ in Brazil, expanding the offerings of the MasterCard Black lounge in Campos do Jordão through alliances with the most sought-after brands in Brazil and around the world. We’ve also organized MasterCard Black Vintage Weekends highlighting our partnerships with elite brands such as Land Rover, Sony, Segway and Private Collection—Vintage Cars, among others.

Companies are continuously looking for more efficient and effective ways to streamline their accounts payable process. Many have already moved away from paper processing toward an electronic business-to-business payment system, reaping the benefits of automation and added control. According to a study from the Association for Financial Professionals, the 2007 AFP Electronic Payments Survey, the typical organization has reduced the number of B2B payments it makes by check from 81 percent in 2004 to 74 percent in 2007. MasterCard is meeting this growing demand for more efficient payment management through its MasterCard Payment Gateway™ solution.

MasterCard Payment Gateway is a flexible enterprise-wide payment processing platform that offers an enormous opportunity to manage multiple payment types between buyers, suppliers and their financial institutions. The solution simplifies an otherwise inefficient, check-dominated payment process by allowing for straight-through processing with enhanced security and increased productivity.

Further expanding our capabilities in this area, we have integrated the MasterCard Payment Gateway with iPayables’ electronic invoice delivery capabilities, creating a faster and more secure payment process. iPayables is the first non-bank reseller to couple with MasterCard Payment Gateway.

Momentum for the product continues with a recent bank launch announcing the successful use of the MasterCard Payment Gateway network to integrate an electronic purchasing card into a customer’s accounts payable system, streamlining vendor payments and driving consistency across multiple types of payments.